Q&A with Freedom Boat Club owner John Giglio

John Giglio has been with Freedom Boat Club since 2004. He became the sole owner in 2012.

John Giglio, 39, operates Freedom Boat Club, a membership organization that markets itself as an affordable alternative to boat ownership.

Giglio has been with Freedom since 2004 and became sole owner in 2012. During that time, the club changed its pricing system, saw its membership grow exponentially and added franchises. The business did well during the Great Recession and continues to grow as the economy recovers.

Before joining Freedom, Giglio was the sole non-family member at a chain of auto body repair facilities on the west coast of Florida. He and his wife and their two elementary school-age children still live in that area, which has 13 corporate-run Freedom facilities.

When he came aboard in 2004, a Cincinnati investment group had become the new owner of Freedom. “They had just bought it and weren’t exactly sure what they had yet,” he says.

The group hired a president to run its corporate locations — there were nine on the west coast of Florida — and he hired Giglio. From 2004 to 2007 Giglio ran the operations side of the business, then moved into sales.

We asked Giglio to tell us more about Freedom Boat Club and get his perspective on the marine industry today.

Q: Tell me how Freedom Boat Club has evolved since you came aboard.

A: When the club was founded in 1989, it was built on the premise of time share. So the pricing through the first 16 or 17 years was really predicated on the time-share model. People would pay a whole bunch of money up front, and then a very small amount on a monthly basis.

Back in 2007, as the economy started to turn, we flipped that upside-down. We started charging less on the front end and little bit higher monthly payments, which made the sales process a lot easier. Once we dialed in on the sales process, I then went back and started running operations again. So I was doing sales and operations from 2007 to about 2010 or 2011, when the president of the company and I had the opportunity to buy it. We closed on the [sale] in March 2011.

The business had gone through a transition three years earlier and it started to really take off. As the economy went down, our business got better. We had this neat little recurring revenue model we’d never had before. While consumers were looking at ways to get on the water, we kind of fell right into that niche. When Bob Daily and I purchased the company, it was really just lucky timing, I guess.

In May 2012, Bob decided he wanted to retire full time. I bought him out, and I’ve been the sole owner since. In those years, really the last three years, we grew the club considerably. There were about 50 locations when we bought it and there are about 78 now.

Q: You mentioned a change in pricing model. What played into that shift and how do you find your customers respond to today’s model?

A: Freedom had been going through a transition. Every four to five years, the company would sell. Back in 2007 someone would join the club — most popular was a 5-year membership, but those members would pay about $15,000 to join and then they’d pay around $50 a month.

When the club was founded in 1989, it was built on the time-share model for boats.

You’d get all that money up front, and what would end up happening is we would almost have 12 year-ends. At the end of every month the company was looking to make payroll, and expenses would be creeping up, so now membership was being discounted to $11,000, $12,000, whatever the number is. Over time, it just wasn’t a sustainable business model.

The company was owned by four or five different groups over the years. Each would run it that way for a few years and then would have to replace the boats, but they couldn’t afford to replace the boats because they took all that money up front and didn’t allocate one-fifth to replenish the fleet.

It just became kind of a treadmill that the previous owners were running on. So when Bob and I looked at the model back in June of 2007, he asked me to become sales manager. I said, well I’m not really interested in getting involved with sales if it’s going to be part of the same program, and that’s when he developed this new model.

What we did was — two things, really — we made the company very financially secure because we took a product that was extremely front-end loaded and now we put the onus on the company to provide exceptional service so our members would continue making monthly payments.

What our members pay now — and it varies across the country — but at my corporate locations my members pay a one-time entry fee of $5,500 and then make monthly payments of about $250 a month. So it put the onus on the company now to provide exceptional service so they would continue making those payments.

The company has more than 8,000 members nationally.

But the secondary thing it did is it really opened the market up to a whole bunch of people that could not afford $15,000 down. Our old argument used to be [that] there’s people who could go buy a boat for $15,000; they didn’t really want to buy a boat. They saw the benefits of the club, but when you’re comparing apples to apples like that, they could.

It became a much more difficult sell, especially when the economy began to turn. Nobody had $15,000. People used to buy boats with their home-equity lines, banks were readily lending and that all went away. As that shift in the economy happened it wasn’t necessarily Bob or I being clairvoyant in the product change; we just saw it was more and more difficult to sell these memberships. Once we changed that pricing model, it absolutely opened the floodgate for us. This now became a recreational activity that was affordable to really everybody.

Q: What did that do for membership?

A: Up to that point we had about 1,000 members on the west coast of Florida. Currently we have around 3,000, so in the last eight years our membership has tripled. From a national standpoint, we have just over 8,000 members.

Q: Can you help distinguish between the 3,000 and the 8,000 members?

A: I have two business models. In addition to franchising and selling franchises, I own and operate locations on the west coast of Florida. From Bradenton to Naples, I have 13 corporate-run facilities. At those facilities we have 3,000 members. Nationwide, which includes all of the other franchises, we have close to 8,000 members.

Q: And the others set their own pricing, based on what makes sense in their market?

A: Yes, and as you know, boating is completely different around the country. Marina expenses, the types of boats they need to run in San Diego are different than the boats I need to run in Venice, Fla., so they take those factors into consideration and that’s how they develop their pricing model. But everyone’s on a similar model in that it’s an entry fee of some sort and then monthly payments.

Q: You recently spoke as part of a Boating Writers International panel addressing affordability in boating. Can you talk about how Freedom fits into making boating more accessible and affordable?

A: First of all, I was extremely honored that they asked me to be on the panel with Brunswick CEO Dusty McCoy, Legendary Marine co-owner Fred Pace and GE Capital’s Bruce Van Wagoner. As I sat and listened to the manufacturing standpoint, the marina standpoint and the banking standpoint, it quickly reaffirmed my opinion that we are a much-needed and quickly growing segment of the industry.

When the economy tanked, the company adjusted its business model to charge less on the front end of a contract and require higher monthly payments.

From the manufacturing standpoint, they’ve been asking themselves how they make a less expensive boat so they can attract new people. Banking still has not caught up and banks still aren’t lending in all markets, and as Fred Pace mentioned, his average boat sale, I think he said, was about $80,000.

So when you compare an $80,000 boat to the types of boats we’re running, which is probably more of a $30,000 or $40,000 boat, we are such an effective avenue to get people engaged in boating, people who don’t necessarily want to go out and plunk down $50,000 to $80,000.

People who may not know if they like boating can join a club and try a whole bunch of different boats. They can get the training that virtually nobody else offers. We offer hands-on training to make sure our members are safe and comfortable out there.

A secondary standpoint, we’re fortunate on the west coast of Florida to have a large retired population here. As the industry struggles with how to keep those people in boating, we’re an unbelievable resource for them, too — you know, those people who don’t want to give up boating, but can’t handle the physical demands anymore. Clubs are a great option for them, as well.

The way I look at it overall, we are a tremendous resource for attracting new people into the market, teaching them how to safely operate a boat and giving them the tools to be able to decide what kind of boat they want. Then on the back end, once those people have cycled through the boating life cycle, as I like to call it, we’re going to get them again as they exit the pitfalls of boat ownership.

Those are the two biggest segments of our demographic.

Q: When our generation was growing up, we might’ve had one or two activities. Kids today who are born into a middle- [or] upper-middle class family that can afford to buy a boat are often in four or six activities for each kid. That means constant and frenzied activity on weekdays and weekends. Do you think the industry fully grasps the magnitude of this hurdle?

A: I don’t know that they do. I really don’t. I don’t want to knock the industry, but at the same time demographics have changed dramatically. Not only the aging baby boomers, but the younger people, they may have grown up boating, but it was a huge time-consuming event for them. Like you mentioned, they had the time to do it. They weren’t involved in three or four extracurricular activities a week. That’s what people used to do with their recreational time. They used to go boat as families.

I think that’s been lost, and I don’t necessarily think it’s been lost because they’ve lost their interest or passion for the water; it’s been lost because they don’t think they have the time to do it.

It’s crazy. My kids get home at 7:30 at night. They go to school, and then they do something after school. They come home and do homework, and then we’ve got soccer games on Saturday morning. We have one day a week where we can really spend quality family time together and we love getting out on the water.

The second part of that, and I forget the statistics for this, but we do a lot of work with Discover Boating’s Take the Helm program and we donate a lot of boats for the boat shows that they have hands-on training classes on. I forget the statistics, but it’s extremely high. I want to say 70 percent of people that boat today boated as children.

If we don’t find some way to engage the younger demographic to not only get them on the water, but also get their children on the water, that’s a huge missed opportunity.

Q: What do you think of the relatively recent emergence of the peer-to-peer model in boating, and how do you see its role?

A: I’ve been talking to a couple of those groups over the last four or five months, really trying to do some research on them. I still don’t know that I understand the concept entirely. From our standpoint I don’t necessarily look at it as a competitive threat to our segment of the industry. I think it might be more of a threat to boat rental businesses, but I think it’s interesting.

One thing that I really like about it is that it’s something new to the industry. And in this industry, what I’ve found out over the last 10 years, and I’m not an industry expert, but there are very few new concepts entered in. For a long time we were looked at as a new concept, and even though we’ve been around for 25 years I think we still are looked at as a new concept.

This is truly a new, within the last 18 months, way for people that currently have boats to get additional revenue from their boats, but also provide some sort of offering to help get people on the water. I still don’t know all the ins and outs of it and whether it will be successful long-term, but it’s interesting. I think if there’s a deficiency in that program it is the training. There really is no formal hands-on training, as far as I know.

Q: You’ve mentioned training. Can you talk about the training that Freedom offers?

A: Before any of our members can take a boat out, we have them set up with one of our instructors. All of our instructors are U.S. Coast Guard captains. We have a proprietary training program that we have put together. That’s one of the big deficiencies in the industry, as I see it. There’s not a lot of hands-on training.

You can do Power Squadron [training] or go to the Coast Guard Auxiliary, and they have great conceptual programs, but they don’t give you that hands-on training in most areas. So they’ll sit in the classroom and we teach them what’s out there, rules of the road, what channel markers look like, the conceptual program like the other ones. Then we bring them on the water, so they’re operating the boat with one of our instructors.

All of our training is individual, so we don’t put 20 couples on a boat. It’s a couple and one of our instructors. We teach them general navigation, how to follow channel markers: “Here’s what we saw in the classroom, here’s the Intracoastal Waterway marker, take the green here, take the red there,” so we explain all that.

We teach them anchoring, we teach them docking, fueling, close-quarters navigation. The majority of incidents that happen in boating usually happen around a dock because people get nervous. We focus on that aspect of training. Once they’ve completed that program, the first question we ask is, “Are you comfortable?” and if they say yes, then the next question we ask is “Are we comfortable?” with the handling, instruction, safety and competency.

If they are, they’re set free to get into the reservation system and start booking. Then we have a secondary training session, which in some of the areas will be offshore training, and then they can take out our bigger boats. It’s just a more advanced training class — navigating a jetty, man-overboard training, just things to make sure they can get out and in safely.

We have some sailboats in our fleet — not a lot, but a few — so we have a sailboat checkout program to make sure they can competently pull the boat in and out of the slips — make sure they can actually sail the boat safely — so we know that when they take that boat and leave that they have the skills to bring it back.

Q: What size range and type of boats do you have available at Freedom?

A: In my corporate locations we have boats ranging from 18 to 25 feet. We have deckboats, pontoon boats, in-shore fishing boats, offshore fishing boats — it’s a wide variety of boats. Some of my locations have cruisers in the neighborhood of 35 to 40 feet. It just really depends on the area of the country and what boating is conducive to that area.

Q: Do people pay monthly even if they’re in a location where the boating is seasonal?

A: It’s still monthly, but one of the nicest things about Freedom is you have a fleet of boats around the country. So even if you’re a member in Boston, you not only get to use their clubs in an unlimited capacity, but you can also use the boats at all of the franchise locations. So if you’re on vacation on the panhandle of Florida, you can use my locations and there’s no additional charge for that. If you’re in San Diego, you can take a boat out. If you’re in Austin, you can take a boat out.

So even though you do pay that fee year-round, you actually do have year-round access. And if you’re a boat owner up in that neck of the woods, you’re going to pay for that year-round regardless. We try to make it a very reasonable fee, and you get access year-round around the country.

Q: You mentioned that you can’t take a boat up and down the coast for a few weeks. How long can you take a boat? Does it have to be returned that day?

A: Actually, the way our program works is our members can have four reservations in our system at one time. Our boats can be kept overnight. So let’s say a member booked a boat Monday, Tuesday, Wednesday and Thursday. If they have a dock, they can keep it at a dock or they can take it somewhere, as long as it’s moored at a dock. We don’t want our boats floating out in the Gulf for three days or somewhere at an island. We want to know where they are.

The way our reservation system works, based on that same concept of the four reservations, say they booked a boat Monday through Thursday. At the end of the day on Monday that reservation rolls out of the system, so our members can then get back in and book another reservation. If the same boat’s available Friday, they can book that boat for Friday. As soon as Tuesday rolls out of the system, they can look to see if that boat’s available Saturday. So they can always keep four rolling reservations in the system.

In addition to that, we have unlimited spur-of-the-moment boating. So if a member woke up this morning and didn’t have a boat reserved but decided they wanted to go boating, all they have to do is call the dock. They may not get the exact boat they want, but there are always boats available.

Q: So how do you see things evolving in the next five years, and do you see improvement in the overall economy as a positive for Freedom or a potential drawback?

A: Over the last couple of years I’ve been contemplating that. And as the economy began to improve, my thought was, well, it’s probably going to hurt our business. But what we’ve seen is completely the opposite. People are definitely coming out and spending money again. We have been experiencing over the last five years double-digit growth, both in revenue and membership-wise. It’s been extremely positive from our standpoint.

We retain about 93 percent of our membership, so on an annual basis I lose about 7 percent of my members. And for the first time in a long time when I call those people as they’re exiting the club and ask how their experience was and why they’re leaving the club, I’m having a lot more people telling me they’re buying boats.

Our business has not slowed down at all. I sold more memberships in the first quarter of this year than I did the first quarter of last year.

From a franchise standpoint, we opened 19 new locations last year. I anticipate that we’ll do between 15 and 20 again this year. The concept itself is becoming more mainstream.

My hope is in the next five years to have somewhere close to about 200 locations. While we did just open our first location on the West Coast, in San Diego — we sold our first franchise out there — I see some great areas of the country out West [such as] inland lakes that are ripe for a boat club. Being the country’s oldest and largest, I see us at the forefront of that.

Q: Are there others?

A: There are a lot of mom-and-pops. But with our direct purchase arrangements with the manufacturers and the fact that we’re flipping boats every three years now, it’s tough to compete with us. They can compete with us on price, but they can’t compete with us on service or overall offerings.

Q: You guys flip boats every three years?

A: Yep. We have about 800 boats in our fleet right now. We buy a lot of boats.

Q: You mentioned donating boats for training purposes. How does that work?

A: One of the interesting things about the Take the Helm Program, sponsored by the Discover Boating program, is that they are always looking for boats to run their hands-on training. They found out, much like we found out, that when you get people behind the helm of a boat, it makes a lot of difference.

Number one, they’re offering the hands-on training that is virtually nonexistent, but when you get people on a boat and touching the boat, it gets them excited to go boating. It’s one thing to sit there and watch boats go by, but when you’ve got your hand on the throttle it adds a whole new element.

At boat shows around the country that are in close proximity to one of our locations, we put our boats into that Take the Helm program. A lot of the manufacturers don’t want to put their new product in the water and let a whole bunch of people come in and knock it around. We give them the resources to run their training, and it’s great exposure for us, too.

Q: You have a unique perspective on the industry. How do you see things shaping up, in general, for the marine world?

A: I really think over the last five years the industry has started to evolve. You mentioned the peer-to-peer model, the ever-growing acceptance of boat clubs. I think for years the industry’s been behind the times, so I think it’s refreshing that there are some new concepts starting to pop up. I think the faster the industry embraces the change, the quicker it’s going to rebound.

This article originally appeared in the June 2014 issue.

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Comments

Very interesting article. It looks as though this model will continue to be successful and motivates a larger cross-section of individuals to get involved with recreational boating. I think I’ll probably look into this and would very much like to meet John Giglio to talk about franchise opportunities as we begin to transition our company down to Naples Florida.
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Tom Johnson, CPMR
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